Amman, July 6 (Petra) -- Jordan's banking sector is positioning itself as a key driver of the Kingdom's transition to a green economy, backed by a robust financial system, an evolving regulatory framework, and growing integration of sustainability principles into banking operations.
The shift comes amid national efforts to advance sustainable finance in line with the Economic Modernization Vision and Jordan's commitments to addressing climate change, strengthening energy and water security, and improving resource efficiency.
Association of Banks in Jordan (ABJ) CEO Maher Mahrouq said the banking sector is well positioned to play a leading role in financing the transition to a green economy, citing the sector's resilience, sound governance, advanced risk management practices, and increasing adoption of environmental, social and governance (ESG) standards.
In an interview with the Jordan News Agency (Petra), Mahrouq said the green economy has evolved beyond an environmental objective to become an economic and investment imperative that enhances sustainable growth, improves resource efficiency, strengthens competitiveness, and bolsters the economy's resilience to global challenges.
He said Jordanian banks have made significant progress in recent years by embedding sustainability into their business strategies, strengthening environmental and climate risk management, and expanding financing products that support environmentally sustainable projects. He described the Central Bank of Jordan's Green Finance Strategy (2023-2028) as a milestone that established a national framework for mobilizing finance toward green investments.
Mahrouq said banks increasingly recognize that climate change, energy security, and water challenges are closely linked to financial stability and asset quality, prompting them to incorporate ESG considerations into lending and investment decisions as a core component of prudent risk management.
While green finance continues to expand steadily, he noted that measuring its overall size remains a work in progress as the sector develops unified definitions, classifications, disclosure standards, and reporting mechanisms aligned with international best practices.
He said financing has primarily targeted renewable energy projects, particularly solar power, alongside energy efficiency initiatives, water resource management, green buildings, sustainable transportation, and industrial projects adopting cleaner, more efficient technologies.
Banks have also broadened their green finance offerings to individuals by providing financing for residential solar energy systems and electric vehicles, reflecting wider adoption of sustainable financing across the economy, he added.
Mahrouq described green finance as both a development tool and a promising investment opportunity, noting that sustainable projects improve productivity, lower operating costs, enhance business competitiveness, stimulate economic growth, and create jobs.
He identified several challenges slowing the expansion of green finance, including a limited pipeline of bankable green projects, the relatively high cost of sustainable technologies, and insufficient environmental and technical data, particularly among small and medium-sized enterprises (SMEs).
Addressing those challenges, he said, will require establishing a clear national taxonomy for green projects, developing comprehensive environmental databases, and strengthening mechanisms for measuring environmental impact to improve transparency and support more informed lending decisions.
Mahrouq also stressed the importance of raising awareness among businesses and individuals about the long-term economic benefits of green investments, noting that many sustainable projects generate substantial cost savings while delivering environmental gains.
He called for additional incentives, guarantees, and technical support programs to reduce investment risks and encourage greater financing of sustainable projects, particularly in priority sectors.
Mahrouq highlighted close coordination between the Association of Banks and the Central Bank of Jordan through technical committees, workshops, capacity-building initiatives, and ongoing dialogue with banks operating in the Kingdom. He said the association also serves as a bridge between banks and regulators by conveying industry feedback that helps shape policies suited to Jordan's banking sector.
This collaboration, he added, has strengthened banks' institutional readiness, improved the integration of climate risks into credit and risk management frameworks, and supported the development of sustainable financial products.
Mahrouq underscored the need to expand green financing for SMEs through more flexible financing solutions and stronger guarantee mechanisms to help businesses invest in energy- and water-efficient technologies.
He added that sustainability has become a strategic priority for many Jordanian banks, extending well beyond corporate social responsibility initiatives to encompass lending, investment, and risk management policies.
Looking ahead, Mahrouq projected strong growth in Jordan's green finance market, driven by legislative reforms, rising investment in renewable energy, water, sustainable transportation, and green infrastructure, as well as growing international interest in financing low-emission projects.
He said the coming years are expected to see wider use of sustainable finance instruments, including green bonds and sustainability-linked financing, alongside stronger partnerships with regional and international financial institutions to attract quality investments and support strategic development projects.
Mahrouq concluded that Jordanian banks have already begun shifting from merely recognizing climate risks to integrating environmental considerations throughout their financing and risk management activities. Although methodologies for measuring the carbon footprint of financing portfolios continue to evolve, he said the sector's direction is clear: expanding sustainable finance in line with international best practices while supporting the Kingdom's economic modernization and long-term sustainable development.
//Petra// AJ
